The development of the EU regulatory and supervisory framework applicable to UCITS: a critical examination of the
conditions and limitations of mutual recognition

Buttigieg, Christopher
(2014)
The development of the EU regulatory and supervisory framework applicable to UCITS: a critical examination of the
conditions and limitations of mutual recognition.
Doctoral thesis
(PhD), University of Sussex.

Abstract

The thesis examines the conditions and limitations of mutual recognition and seeks to identify the lacunae in the governance mechanism and the regulatory framework applicable to undertakings in collective investment in transferable securities (‘UCITS’). It assesses the regulatory and supervisory mechanisms that may be applied to address the identified weaknesses. For this purpose, the thesis formulates a theoretical framework for effective mutual recognition based on quasi-maximum harmonisation, reflexive governance of financial supervision and a mechanism for the strengthening of mutual trust between national financial supervisors.

The technique for financial regulation in the field of UCITS should create the right balance between implementing a policy designed to attain a high degree of harmonisation of investor protection regulation and making exceptions to address national differences. The picture that emerges is one where a model based on minimum harmonisation causes serious limitations to mutual recognition in the form of inconsistencies in the implementation of EU Law and the application of national discretions. Quasi-maximum harmonisation becomes the optimal technique for UCITS. However, the limitations of a model based on minimum harmonisation of regulation resurface, although to a lesser extent, even in a framework based on quasi-maximum harmonisation.

The solution is not one where an even higher degree of harmonisation (the single rulebook mechanism) is required, but lies in reflexive governance of financial supervision combined with a framework for the strengthening of mutual trust between national financial supervisors. This framework can form the basis for overcoming the remaining obstacles to the cross-border activity of UCITS, including the barrier to the depositary passport which is the last major bastion that stands in the way of a complete internal market for UCITS.